ATT says Portland can't regulate Net access

CBS.MarketWatch.com

PORTLAND, Ore. (AP) -- AT&T told a federal appeals court Monday that it should be able to control Internet access to the cable TV network it purchased last year and that the city and the surrounding county have no right to make it do otherwise.

City and Multnomah County officials argued, however, they were simply protecting the city from a monopoly when they voted earlier this year to force AT&T to open up access to the network to competitors.

The 9th U.S. Circuit Court of Appeals ruling on the case is not expected until next year, but it could decide whether local government can regulate the way cable TV systems are converted to Internet use and telephone service.

AT&T
T, -0.07%
is struggling to keep the issue in court after U.S. District Judge Owen Panner ruled last June the city and Multnomah County had authority to pass ordinances requiring AT&T to give Internet competitors access to the cable system acquired in the 1998 purchase of Tele-Communications Inc.

AT&T had sued the city and the county to block the ordinances, but Panner dismissed the complaint and AT&T appealed.

On Monday, the company took a new tack, arguing its cable TV network is not really a cable service at all. Instead, AT&T claims, the city and county have changed it into a telecommunications service by forcing the company to turn its cables into an electronic "pipeline" that anybody can use to send data or voice traffic.

"Fundamentally, this comes down to the difference between services and the pipeline over which those services are carried," said Mark Rosenblum, AT&T vice president.

Portland city Commissioner Erik Sten says he really doesn't care which way AT&T defines itself - as a cable network regulated by local government or a telecommunications network regulated by the Federal Communications Commission.

"If it's a cable service then the city and the county have authority to regulate it," he said after the court hearing. "And if it's a telecommunications service, great - the federal government has authority. Either way, it's open access."

But the lead attorney for AT&T told the three-judge appeals panel that the FCC has deliberately taken a hands-off approach to regulating cable access to the Internet after the Telecommunications Act of 1996.

"Congress was clear," David Carpenter said, "because it wanted nothing - nothing - to get in the way of that conversion."

AT&T also claims that if local governments are allowed to regulate cable access to the Internet, requirements will vary across the nation, forcing costly changes in equipment and services that will ultimately affect the consumer.

"You'd have a patchwork of different regulations," Carpenter told the appeals court. "It would be like having highways of different sizes running through Portland and running through San Francisco."

But the head of coalition of Internet service providers who support the Portland ordinance say AT&T is just trying to avoid having to make deals that would cut into its profits.

"As long as they think they can get a monopoly, they won't make the first deal," said Greg Simon, co-director of the OpenNet Coalition in Washington, D.C.

"If they think they can't get a monopoly, they'll make hundreds of deals," Simon added. "And Portland is the lever that could break it loose."

He said Internet providers are more than willing to help share in the expense of upgrading cable networks to Internet use, he added.

A handful of other municipalities have followed Portland's lead, including Broward County, Fla. Last week, St. Louis voted to force open access and is awaiting action by the mayor.

But other municipalities, including the local cable commission that oversees the western Portland suburbs in Tualatin Valley, have decided against forcing AT&T to share its network with competitors.

AT&T says it will keep upgrading its cable network but it won't activate Internet service until the lawsuit is resolved.

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